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USDA redesigns and submits GIPSA rule

USDA has scaled down its proposed Grain Inspection Packers and Stockyards Act (also known as the GIPSA rule) and sent it on to the White House Office of Management and Budget for a 45-day review.

OMB is the last step in the rulemaking process before a rule is finalized. Once OBP signs off on the rule, it will go into effect 60 days later.

The revised GISPA rule is so new that most commodity groups and the packing sector are still reviewing the details. According to reports, the new version of what has been a highly controversial bill includes four of the five provisions outlined in the 2008 Farm Bill. It was the 2008 Farm Bill that started the actions to address certain contract arrangements for livestock and poultry production as well as the buying and selling procedures. The old version of the rule was proposed in June 2010 and has been languishing.

The provisions designated in the 2008 Farm Bill dealt with poultry companies giving growers reasonable notice prior to suspending the delivery of birds, addressing poultry and pork production contracts that require growers to upgrade facilities, termination issues surrounding production contracts and the use of arbitration to resolve contract disputes. According to the National Pork Producers Council, a provision requiring the terms "undue" or "unreasonable" preference or advantage to be defined does not appear to be included in the new regulation. That wording was of particular concern as it relates to packer buying programs and the potential for premium pricing based on such things as carcass quality, consistency or the number of animals sold.

USDA also proposed, as an interim final rule, a regulation for the poultry industry's tournament pay system. This refers to a compensation system that some integrated poultry companies use to pay growers based on their ranking according to certain criteria such productivity results.

Provisions that were included in the original GIPSA rule, but which have now been dropped include those prohibiting packer-to-packer sales of animals, and the need to prove competitive harm in order to win a case under the Packers and Stockyards Act. Livestock and poultry packers argued that USDA was attempting to define competitive harm much more broadly than most courts.

The original rule had received backlash from congressmen, as they argued that USDA’s proposal went far beyond Congress’ intention outlined the 2008 Farm Bill. In fact, the House did not include funding to implement the old GIPSA rule in its 2012 appropriations bill.

NPPC strongly opposed the original GIPSA rule, with the pork industry submitting extensive comments and testimony against the proposal. NPPC officials contend the act as previously proposed would not only have resulted in excessive costs, but that it would have driven animal agriculture toward further consolidation. “It would have been bad for farmers and ranchers, bad for consumers and bad for rural America,” NPPC said.

But, not everyone in agriculture is pleased with USDA’s revision. National Farmers Union President Roger Johnson said in response to the proposed changes, “NFU is encouraged to see parts of the GIPSA rule advance, but much more work has yet to be done. The most critical aspects of the GIPSA rule must be finalized in order to prevent further damage to rural America.”

He added: “USDA did not yet forward to OMB the most critical parts of the rule, which include a clearer definition of USDA’s interpretation of competitive injury. The competitive injury definitions address the fundamental problems that have plagued the livestock and poultry industries.”

He contends that economic studies of the GIPSA rule have used flawed assertions and claimed that thousands of jobs would be lost, that the rule would cost billions of dollars and that retail meat prices would increase.

R-CALF and other groups are not expected to give up the fight, and efforts to revise this latest proposed rule will continue.